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3 Top Picks in Regional Banks: Oppenheimer

PVTB Chart PVTB data by YCharts

2. PrivateBancorp

Shares of PrivateBancorp (PVTB - Get Report) of Chicago closed at $19.14 Monday, returning 25% this year, following a 40% return during 2012.

The shares trade for 1.3 times tangible book value, and for 13.3 times the consensus 2014 EPS estimate of $1.44. The consensus 2013 EPS estimate is $1.36.

The company reported first-quarter net income available to common stock holders of $27.3 million, or 35 cents a share, increasing from $20.0 million, or 26 cents a share, in the fourth quarter, and $10.8 million, or 15 cents a share, in the first quarter of 2012.

Net interest income for the first quarter was $103.0 million, declining from $104.8 million the previous quarter and $104.4 million a year earlier. PrivateBancorp's net interest margin for the first quarter was 3.19%, widening slightly from 3.16% in the fourth quarter, but narrowing from 3.53% in the first quarter of 2012.

The main factor in PrivateBancorp's significant earnings improvement has been a decline in credit costs. The company's first-quarter provision for loan losses was $10.4 million, declining from $13.2 million the previous quarter and $27.7 million a year earlier. The company also saw a decline in costs to maintain foreclosed real estate to $6.6 million in the first quarter from $9.6 million in the fourth quarter and $8.2 million in the first quarter of 2012.

In a note to clients on April 18, McEvoy wrote that "the transition from credit recovery to growth is firmly under way," and that "earnings in '13 will continue to benefit from lower credit and real estate-related costs.

"While many small-cap banks are struggling with earnings growth, we forecast EPS growth of 10% in '14," McEvoy wrote, adding that "this should translate into a higher valuation for PVTB, supporting our $21 price target."

McEvoy estimates PrivateBancorp will earn $1.32 a share this year, with earnings increasing to $1.45 a share in 2014.

Interested in more on PrivateBancorp? See TheStreet Ratings' report card for this stock.

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